Transactions at VPBank (Photo: VNA)The State Bank of Vietnam is drafting a decree to amend several points of theGovernment’s Decree No 01/2004/ND-CP dated January 3, 2014, about foreigninvestors purchasing stakes at Vietnam’s credit institutions.
An amendment proposal which attracted attention was that banks which receivedthe forced transfer of weak credit institutions could extend the foreignownership limit from 30% to 49%.
Nguyen The Minh from Yuanta Securities Vietnam said that to attract big foreigninvestors, the foreign ownership limit must be attractive enough to ensuretheir rights.
Increasing the foreign ownership limit to 49% might create a “magnet” forforeign investors, he said, adding that this would also help foreign investorsto have large enough stakes to participate in the governance and management toimprove operational efficiency and accelerate the restructuring process.
According to Yuanta, among banks which were participating in the process ofrestructuring weak credit institutions, except for Vietcombank, which has aState stake of more than 50%, the remaining three banks, including MBBank,HDBank and VPBank, would have the opportunity to increase the room for foreignownership.
The foreign stake at MBBank is currently at 23.24%, HDBank 18% and VPBank 17.6%,much lower than the proposed limit of 49%.
If the foreign ownership limit at credit institutions is raised to 49%, therewould be significant room for banks to raise capital from internationalfinancial institutions to restructure weak banks transferred to them.
Under the EU – Vietnam Free Trade Agreement, within five years of theagreement's effective date, Vietnam would consider allowing two European creditinstitutions to own up to 49% of the charter capital of two Vietnamese banks(except for the Big 4 group).
This meant that up to five banks could have a foreign ownership limit of 49%.
According to Vietnam Securities Depository, as of January 3, among 30 listedcommercial banks, 16 of them had at least 15% in foreign stakes.
Despite the proposal to increase foreign ownership limits, it is not easy toattract foreign investment.
While some banks are running out of room for more foreign ownership, othersfailed to attract foreign investments to the limit of 30%.
According to General Director of the Banking Association Nguyen Quoc Hung it isnecessary to improve the legal framework in a way that is more in line withinternational practices and ensures long-term stability and consistency.
Hung Hùng said that increasing the foreign ownership limit was necessary, butit must ensure the harmonisation of benefits between investors and Statemanagement requirements, stressing that clear and consistent policies from thebeginning would greatly support commercial banks in accelerating therestructuring and integration process.
With a cautious viewpoint, expert Vo Tri Thanh said that there should bedifferent foreign ownership limits for different groups of banks, depending onthe assessment of the State Bank of Vietnam.
For example, commercial joint stock banks which completed Basel II and wereunderway to implement Basel III could be allowed to increase their foreignownership limit to more than 30%.
However, Vietnam needed to study more carefully the benefits of increasing theforeign ownership limit, Tran Thi Hong Minh, Director of the Centre Institutefor Economic Management, said.
She added that the increase of foreign ownership limit should be consideredalong with other policies and proposals about developing internationalfinancial hubs, fintech and payment intermediaries.
Promote securities market
In June 2022, once again, Vietnam was not included in the list of MorganStanley Capital International (MSCI) for consideration of upgrading from afrontier market to an emerging market. Out of 17 ranking criteria, MSCIassessed that Vietnam did not meet nine criteria, one of which was “foreignownership limit”.
Financial expert Duong Anh Vu said it was necessary to increase the foreignownership limit at listed banks early.
Many other markets in the region with T transactions and similar securitiesmarket infrastructure and technical conditions were upgraded to emergingmarkets while Vietnam remained at frontier status. The only difference was thatforeign ownership in Vietnam was limited, Vu pointed out.
According to Minh, foreign ownership was the core factor in upgrading to anemerging market.
“We must create a fair playing ground for every investor,” he stressed.
In other words, if foreign ownership at banks was still limited at 30%, theroad to emerging markets was far away, Minh said, adding that banking stockswere the group with the highest market capitalisation on the stock market./.
VNA
